FROM BARNS TO BIG BOXES REDUX 2012 NEW LAWS, NEW ECONOMY Trust Accounting- 3-way Reconciliation Trust Account Balance Bank Statement Balance Amounts For Each Client Proposed Opinion 2011 FEO 7: Law firm may use on-line banking but only if managing lawyers are regularly educated on security risks and actively maintain end-user security. Positive Pay Rynoh Live www.rynoh.com
2011 Lawyer s Trust Account Handbook www.ncbar.gov What Do We Do About This?
Do Not be an easy target! FRAUD #2: Fraudulent Checks The Overpayment Scam
Case # 1 - Allegedly Drawn on Wachovia Case #1 Florida Agent, Wachovia
Case #1- FACTS Legitimate looking check arrived in the mail with a transmittal letter. Agent called the broker shown on the check who said that he was working with a local realtor and needed to move fast now, and to just deposit the check and cut one back for the difference. The local realtors all had been working on the transaction for awhile but thought it had died. Agent Googled the buyer s name, Dr. Alaizi Naved, and found articles on check scam in this Dr. s name. Apparently the doctor is real, and someone has been using his name. Contacted the FBI who said that it is not a crime to send someone a check and to submit it to the bank it was drawn on and they would contact them if necessary. Only wanted to work with the bank. Called the bank and dropped off the check---they said it was fraudulent. Told all parties that the bank had determined that the check was not good. Case #1- Same Facts in Another Reported Case The last check example was dated July 29. Online there is a TV report of the exact same scam in Orlando with a check also drawn on Wachovia, with a water mark and looking real, dated July 26. The attorney who was handling the closing contacted Wachovia, who said that it was fraudulent and they were going to investigate. The realtors had apparently put lots of time into this sale.
Case #2 - KY Agent, HSBC Canada Case #3 - KY Agent, Royal Bank of Canada
FACTS They get the name of the agent attorney from the realtor. Notice that they want confirmation of receipt to go to @accounts.com or @accountants.com. Maryland reported 2 instances with an Asian buyer, Mr. Sung, who was in a big hurry and pushed to have the checks deposited and any overage cut back ASAP, because a sick relative needed the overage immediately. In Tennessee several law firms have received these, one for $350,000 from a Canadian Bank, an asian buyer s name. A Massachusetts law firm agent just received an email and check from Murasaki Shikibu for $452,000 cash purchase. Case #3 - FACTS Although they did often work with the realtor, it looked suspicious: 1) It was delivered by regular mail 2) It was a transaction that they were unfamiliar with 3) It was drawn on a Canadian bank The attorney contacted the realtor, who they knew personally, and he said he thought the deal was dead, but it must have come back. He had not met Mr. Sung, the buyer, but it all seemed legitimate to him. The attorney asked for a copy of the contract and what the money represented. The realtor was not sure, it seemed to be for much more money than they needed for any earnest money deposit. Attorney had also received a request to represent Mr. Sung. Not being comfortable with anything up to that point, the attorney contacted HSBC who told them that the check was fraudulent and they then turned it over to HSBC s fraud department.
Sample Email to Realtor Seeking an Attorney I will like to offer $452,100 MLS # 71289903 because I love the curb appeal of this property, please send me and my wife the contract to sign and return immediately this will be my retirement home and it will be a cash buy, Please forward us a purchase contract agreement in DocuSign format, DocuSign format is an electronic way of signing document, their website is www.docusign.net or any electronic signature, I will put down $20,000 earnest money, I want home inspection. I would like to close on the November 30th, 2011, I have been in the area so many times. Earnest money will be sent ONLY to an attorney who will represent and disburse funds accordingly, is our tradition in Japanese culture attorney has to represent in any purchase. My legal name is Murasaki Shikibu my wife is Rika Shikibu, 72 Ryerson Avenue, On, Toronto, Ontario M5T2V4, Canada we await the purchase agreement and the attorney information for the earnest money deposit, we are moving due to Earth Quake in Japan. Best Regard Murasaki Shikibu
Your Fraud Vaccine Contact the bank it is drawn on and verify funds, even if the bank is in Canada or further away. You can also check to see if the routing number matches the bank, by looking it up on your wiring website. DO NOT deposit funds or accept wired funds thinking that you can just cut back the difference or not pay out at all if something goes wrong. The deposited check may later be rejected AFTER your funds going out have gone through. Fraud Vaccines Request identification to comply with Patriot Act: 31 CFR 594.202 Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) List http://www.treasury.gov/resource-center/sanctions/sdn- List/Pages/default.aspx It is a criminal violation to reveal to any party to the transaction the results of an OFAC search or that an OFAC search has been completed. Just follow the OFAC procedure if the fraudster actually gives you the identification at all!!!
What Can You Do? Partner closely with their underwriter staff to submit any required escrow reconciliations promptly, prepare diligently for audits, view the audit process as a way to improve methods, explain any discrepancies in advance, track down every penny every day or every month. Keep a good personal credit report. If they are having serious personal and business financial problems they should seek help from business partners, church or synagogue, Bar Assistance groups, mental health professionals, family/friends, seek loans to reimburse the account while cleaning it up. Ask the Chicago Title representative for copies of Fidelity s newsletter Fraud Insights reporting escrow fraud experiences. Do due diligence background checks on anyone who is handling escrow funds, wiring in and out, signatories, preparing checks. Manage their reputation, publicize their great track record handling funds and documents.